This tells us two things relevant to current economic discussions. First it shows why a VAT is superior to a sales tax because previous taxes paid are credited to final sales, thus avoiding the cascading problem that was at the root of the whiskey rebellion.  Second, it shows why things like the Tobin tax are a bad idea. Because the tax is on transactions rather than final sales one doesn’t know who actually bears the burden of the tax or how much the burden is because of cascading.

I’m continuing to read Matt Latimer’s book and thought I would highlight a few more things that caught my attention.

In chapter 8 Latimer talks about the White House policy of having the president make public comments on at least a daily basis – whether there was anything to say or not. The result was that any special quality that the president has when he speaks was diluted, losing much of its special quality. The quality of the speeches also fell because the speechwriters simply didn’t have anything to say.

I bring this up because we just saw President Obama do five Sunday talk shows the same day plus David Letterman.  Personally, I think this is an absurd waste of access to the president that diminishes him and his office.  I don’t mean that it is undignified or anything like that. I just mean that the president is a precious resource who needs to be used sparingly. Using him too much frivolously cheapens his value and makes him less valuable in terms of advancing his agenda.  Ronald Reagan understood that very well, which is why his speeches were special events that got more attention and were more effective, I think, that those of his successors.

Latimer also notes that many presidential speeches in 2008 were simply excuses to get the taxpayer to pick up the tab for what was really a purely political event. Since the actual speeches on these occasions were peripheral to their purpose, it naturally drained them of any significance. As Latimer writes:

There was no apparent vision for the president’s communications strategy or, for that matter, even a strategy. Sometimes speeches came about because the president was holding a political event in a particular state and his advisors needed to schedule an official event somewhere nearby so trip costs could be split with the taxpayers. (Speeches, in effect, became Muzak for whatever political event the administration thought important.)

Latimer notes that the weekly radio address was considered the worst speechwriting job because they just rehashed whatever the president said the previous week. He seems to be unaware of the reason these speeches came into existence under Reagan. Aside from the fact that he was an old radio guy who enjoyed doing them, they performed the important service of creating administration policy.  In a way, they were more about Reagan communicating his philosophy to his appointees in government than they were about communicating with the American people.

I know there were many occasions when I worked at the White House when we would run into resistance over administration policy. Sometimes this came from the bureaucracy, other times from Reagan’s own appointees, not all of whom shared his ideology. In these cases, it was extremely valuable to point to a clear statement by the president – not a press release or a government report – stating his position on some issue.  It allowed those of us trying to implement his agenda to speak with authority and overcome resistance.  It’s too bad that Bush pissed away this resource by treating the radio addresses as chores rather than opportunities.

Those interested in the issue of cap-and-trade may be interested to know that Bush endorsed this policy in a speech (page 198). But no one knows this because the speechwriters intentionally obfuscated Bush’s endorsement by refusing to use the words cap-and-trade.

On page 201 we learn of the extreme partisanship and pettiness of Bush’s staff. When, after he was diagnosed with brain cancer, it was suggested that Senator Edward Kennedy be awarded the presidential Medal of Freedom, the idea was rejected out of hand on the grounds that Kennedy was a liberal.

On that same page we get a glimpse of how the Iraq fiasco developed. The president’s chief speechwriter, Marc Thiessen, wanted to say that we were winning the war on terror, but the CIA refused to back him up. “The president wants to say we’re winning!” Thiessen thundered.  Latimer’s dead-pan comment: “Just what we needed – another accusation that the Bush White House wanted to politicize intelligence.”

On page 212 we learn that Dan Bartlett (no relation) a senior White House staffer took credit with the president for an idea Latimer had come up with. The picture of Bartlett Latimer presents confirms what I have heard from other White House staffers – he was utterly incompetent but had a knack for getting along with Bush, which was enough to relentlessly push him up the ladder of success from Bush gofer to one of the most important officials in government. Latimer says there was a whole group of such people in the White House: “These were mostly well-meaning people who rose to the very top because they were likable, not supremely qualified.” That’s an understatement.

Latimer is surprisingly critical of Karl Rove, given that he remains a darling of conservatives. Latimer correctly notes that Bush should have won the 2000 election easily and that it was close only because Rove stupidly wasted millions of campaign dollars in a futile effort to win California in the last days of the campaign instead of shoring up Florida. Latimer also notes that Bush’s re-election should have been a slam-dunk but ended up being close. Thus Latimer thinks that Rove’s reputation as a political genius is totally undeserved. I agree. Here Latimer summarizes his assessment of Rove:

Karl was not the hero of the Bush White House, the brilliant behind-the scenes strategist. He was what all the liberals said he was: the villain. And to make matters worse, a clumsy one at that. He employed ham-handed tactics, put forward obviously unqualified subordinates, and stubbornly defended them. He’d turned out to be less a Voldemort than a Boris Badenov chasing Rocky and Bullwinkle.

In the end, Latimer concludes that Bush was never the conservative Latimer thought he was. Bush was just going through the motions to get conservative support and get elected. That’s pretty much what I said in my Impostor book as well.

Originally published at Capital Gains and Games.

Second is how different the Bush White House was from the Reagan White House where I worked. Reagan’s White House was a model of thoroughness, adherence to proper procedure, and respect for the office of the president.  Bush’s White House seems amazingly slipshod, showing total disregard for all of the things that were important to Reagan in terms of how his administration functioned.

On the first point, I was struck by this paragraph as the author discusses his first session with Bush reviewing a draft speech he had written:

The president’s editing sessions went like this: he talked, you listened and scribbled furiously whatever he said. On occasion, he might ask a question. But usually he wasn’t too interested in the answer. Sometimes in the middle of your explaining something, if he felt he wasn’t getting what he wanted, he’d interrupt and say, ‘Okay, here’s what we need to do.’ This wasn’t a process that encouraged dialogue or pushback on an important point. This was George W. decisively telling you what he wanted to say, and you writing it down. Got it?

The problem with such a bullying method is that the president isn’t just some guy expressing a personal opinion when he speaks. If he were, then it would be perfectly appropriate for him to demand that his speechwriters wrote whatever he damn well told them to say.  But the president of the United States speaks not just for himself, not just for his administration, but for the country as a whole. His words carry weight. Consequently, it is appalling to see him treating those words in such a cavalier manner.

Ronald Reagan, of course, was a trained actor, accustomed to reading dialogue written for him by others. Consequently, he had respect for those who wrote the words he spoke. Reagan was a great writer himself and would often edit his speeches. But he did it privately with an editing pen and usually for style, not substance.  I think every Reagan speechwriter had enormous respect for Reagan’s contributions to his own speeches and, in turn, he respected his speechwriters and didn’t treat them like manual laborers, as Bush seems to have done.

Further evidence of Bush’s disdain for explaining himself in public forums can be found in this quote from Latimer’s book about reviewing Bush’s edits to a speech:

By about page five or so, the president started to get bored. You could see it in his face. So, naturally, that meant the speech was too long. By page six, without really reading the ending, he decided it needed to be cut down.

Then, after all this effort, Latimer tells us that Bush completely ignored the speech that had been written for him and ad-libbed some remarks.

One of the things that Latimer talks a lot about is the importance of the president’s mood, which appears to have gyrated wildly. Apparently, the best way to get on his good side was to pretend to be stupid so that Bush would seem like a genius by figuring out some simple point for himself.

Latimer says that national security adviser Stephen Hadley was very good at doing this:

Hadley was a master at handling the president. Though he was a very bright man, he liked to depict himself as the dumbest person in the room. He’d say things like, ‘Oh, Mr. President. I’m sure I’m completely wrong about this, but…’ or ‘I have to apologize, Mr. President, and feel free to calibrate me, but…’ This was the perfect way to talk to George W. Bush.

Later, Latimer talks about Ed Gillespie, the former chairman of the Republican National Committee who was in charge of Bush’s communications strategy toward the end of the administration. Latimer explains the way plans for speeches were developed:

Whenever we talked about an upcoming speech, Ed almost never said, ‘Let me think about it’ or ‘What do you guys think?’ He never said, ‘Let’s figure out what the message of the week is going to be.’ He usually just offered an instant reaction. The whole White House was like that–infatuated with decisiveness, dismissive of deliberation.

I have highlighted the last sentence because John DiIulio said almost exactly the same thing in a famous memo that formed the basis of an article in Esquire magazine early in the Bush administration. I can’t now find a copy of the memo on the web, but here is the article that was based on it.

I continue to believe that a great many of Bush’s screw-ups, most especially on Iraq, resulted from his personal style, which eventually permeated throughout his entire administration.  It disdained facts and analysis and glorified decisiveness and action.  “Shoot first and ask questions later” could have been its motto.

Originally published at Capital Gains and Games.

I think the party got seriously on the wrong track during the George W. Bush years, as I explained in my Impostor book. In my opinion, it no longer bears any resemblance to the party of Ronald Reagan. I still consider myself to be a Reaganite. But I don’t see any others anywhere in the GOP these days, which is why I consider myself to be an independent. Mindless partisanship has replaced principled conservatism. What passes for principle in the party these days is “what can we do to screw the Democrats today.” How else can you explain things like that insane op-ed Michael Steele had in the Washington Post on Monday?

I am not alone. When I talk to old timers from the Reagan years, many express the same concerns I have. But they all work for Republican-oriented think tanks like AEI and Hoover and don’t wish to be fired like I was from NCPA . Or they just don’t want to be bothered or lose friends. As a free agent I am able to say what they can’t or won’t say publicly.

I think the Republican Party is in the same boat the Democrats were in in the early eighties — dominated by extremists unable to see how badly their party was alienating moderates and independents. The party’s adults formed the Democratic Leadership Council to push the party back to the center and it was very successful. But there is no group like that for Republicans. That has left lunatics like Glenn Beck as the party’s de facto leaders. As long as that remains the case, I want nothing to do with the GOP.

I will know that the party is on the path to recovery when someone in a position of influence reaches out to former Republicans like me. We are the most likely group among independents to vote Republican. But I see no effort to do so. All I see is pandering to the party’s crazies like the birthers . In the short run that may be enough to pick up a few congressional seats next year, but I see no way a Republican can retake the White House for the foreseeable future. Both CBO and OMB are predicting better than 4% real growth in 2011 and 2012. If those numbers are even remotely correct Obama will have it in the bag. Also, Republicans have to find a way to win some minority votes because it is not viable as a whites-only party in presidential elections. That’s why I wrote my Wrong on Race book, which no one read.

Powell has to accept that he is in a unique position to command attention and lead the Republican Party—or at least that part of it that isn’t consumed with defending the indefensible on torture or living in a fantasy world where the economy would be booming today if it just wasn’t for Obama’s budget deficits.  It’s a pretty small constituency these days—most of those, like me, who share Powell’s views have left his party to become independents—but it may be enough to build a foundation on that can offer a meaningful challenge to the dominant Cheney-Limbaugh-Palin wing of the Republican Party that views all efforts to expand its membership as a sell-out to be resisted at all cost, even if it means further political losses.

But at the end of the day, the job of a political party is to win elections and to win elections it must be inclusive, not exclusive.  Thus the ultimate message Powell has to offer Republicans is the most persuasive one of all—follow him and win or follow Cheney-Limbaugh-Palin and lose.  Personally, I would like to see Powell follow in the steps of Dwight D. Eisenhower and run for president—I’ll sign up for his campaign today even if it means having to rejoin the Republican Party.  But if he is serious about not wishing to do that, then Powell has a responsibility to help those who share his vision by lending his enormous credibility, popularity and fund-raising ability to their efforts.  If he fails to do so he risks being seen by history as someone who walked away when the times demanded that those who share his beliefs stand and fight for what they believe.

Throughout history many of mankind’s greatest leaders have been those who took on leadership responsibilities only very reluctantly.  I hope Powell changes his mind and becomes the leader that the Republican Party desperately needs.  After all, he is the one who said, in essence, that he would rather fight than switch.

The reason that the tax revolt of the 1970s — which today’s tax protesters hope to emulate — was successful is that it was based on detailed policy initiatives and a solid body of research and analysis that supported them. At the state level, there were things like Proposition 13 in California and Proposition 2 1/2 in Massachusetts, which were very specific proposals for cutting and capping taxes. At the national level, Republicans united around the Kemp-Roth tax bill, which was designed to sharply reduce statutory income tax rates.

These efforts were designed to deal with real problems. The huge run-up in property values in the 1970s resulting from inflation led to automatic increases in property taxes. Many homeowners were literally being taxed out of their homes because their incomes had not kept pace with the rise in home prices. Inflation also pushed workers up into higher tax brackets.

When it comes to the budget, however, those who have been concerned about deficits and spending have almost never come up with any specific proposals for dealing with the problem.

So one might assume that I was out protesting taxes along with many of my friends on April 15. But going to rallies is not my thing; I thought my time and skills were better spent analyzing tax burdens to see what evidence justifies the sudden appearance of mass protests against taxes.

The first thing I did was look at the U.S. tax burden compared to other similar countries. Vast amounts of such data are compiled by the Organization for Economic Cooperation and Development in Paris and easily available on its web site.

The first thing I did was look at total revenues — federal, state and local — as a share of the gross domestic product. This percentage is the best summary measure we have for the burden of government on the economy.

The latest complete data are for 2006. They show that governments at all levels consumed 28 percent of GDP in the U.S. Of the 30 OECD countries, we ranked 26, just slightly above Japan and Korea. Only Turkey and Mexico had significantly lower tax burdens.

The most heavily taxed countries are Denmark and Sweden, where government takes 49.1 percent of GDP. On average, the OECD countries of Europe had a tax ratio of 38 percent — 10 percentage points higher than the U.S.

Since the level of taxation here is already considered tyrannical by tea party organizers, any tax level approaching that in Europe would surely constitute slavery in their eyes. Of course, anyone who has ever traveled to Europe knows that the people there are no less free than we are.

For the most part, Europeans just prefer to pay higher taxes for universal health care, while Americans have the cost deducted from their paychecks by their employers. If Americans took all the money they pay for health insurance and added it to their tax bills, getting free health care in return, our tax/GDP ratio would be about the same as that in Europe.

Keep in mind that Americans have always been willing to pay higher taxes when they got something they need in return. Every family with children looks carefully at the quality of local schools when buying a house and almost all are willing to pay higher property taxes to get good schools. States and localities with the lowest taxes are seldom the best places to live because of a concomitant lack of services.

I published my analysis at Forbes.com and sent it around to some of my conservative friends. The universal reaction was, “So what? Why should Americans care if foreigners are even more overtaxed than we are?”

I thought this was a fair point, so I did another analysis looking only at taxation in the U.S. Even if our taxes are low compared to those in other countries, tax protests might be justified by a rising tax level.

The first thing I did was look for more recent data on taxes as a share of GDP on the website of the Congressional Budget Office. It says that total federal revenues will consume 15.5 percent of GDP this year, down from 17.7 percent last year, 18.8 percent in 2007, and 20.9 percent in 2000.

This is a very sharp reduction in the tax/GDP ratio. As a consequence, the federal government will take less out of the economy in the form of revenue than any year since 1950.

But what about the average American, I wondered? Is it possible that the tax code has changed in some way that makes families worse off even though the aggregate level of taxation has fallen?

To answer this question, I went to the website of the Tax Policy Center. It has a table that looks at federal income taxes on the median family’s income. The median is the exact middle of the income distribution—half of all families make more, half make less.

In 2007, the latest year available, the median family paid 5.91 percent in federal income taxes. In every year from 1958 — the first year available — through 2002, it paid more. In 1981, before the Reagan tax cut took effect, the federal income tax rate on the median family was 11.79 percent—twice what it was in 2007.

Many commentators complained that these data are meaningless because they are skewed by the large and growing number of Americans that pay no federal income taxes. According to the Joint Committee on Taxation, 43 percent of federal tax returns filed in 2007 had no income tax liability.

My critics, however, misunderstood how the Tax Policy Center data are calculated. They are not affected in any way by the number of people not paying taxes. The data simply look at the median family’s income and use current tax law to estimate its tax liability.

In response, my tea party-attending friends said I had left out payroll taxes. But there has been no change in the payroll tax rate for many years and most people will get back cash benefits equal to everything they pay in Social Security taxes plus a lot more. Anyway, I didn’t see any signs at the various tax protests complaining about payroll taxes.

But what about state and local taxes, my critics replied? This is always a problem area, analytically, because they vary widely from one place to another. However, according to the National Association of State Budget Officers, the aggregate amount of state tax increases this year amounts to just $1.5 billion; all of that accounted for by one state, California. Two-thirds of states either cut taxes or had no increase.

Moreover, in surveying the location of tax protests compiled by a group called FreedomWorks, which organized the demonstrations, the bulk of tea parties appear to have taken place in Texas and Florida, which have no state income tax, or states where there has been no tax change. Few protests occurred in high-tax states; most were in states where they are low.

Finally, in desperation, my critics said that it is not actually the level of taxation today that they are protesting. It’s the implicit tax resulting from large federal deficits that really concerns them.

I might have been willing to buy this argument except for the fact that these same people justified a huge tax cut in 2001 on the grounds that large budget surpluses, which had arisen toward the end of Bill Clinton’s administration, were proof of over-taxation since the government was taking in more revenue than it needed to pay its bills.

Furthermore, the conservative line for the last eight years was that budget deficits don’t matter, as Vice President Dick Cheney famously remarked when Treasury Secretary Paul O’Neill raised concerns about them at a cabinet meeting in 2002. (O’Neill was fired shortly thereafter for not being on-message.) It’s at least a bit disingenuous for conservatives to suddenly change their view on deficits simply because their team is no longer in power.

In my opinion, these tea parties had little, if anything, to do with current or projected tax levels. They were just partisan pep rallies designed to make out-of-power conservatives and Republicans feel better. Secondarily, they were about building audiences for Fox News and right-wing talk radio hosts.

But I will grant that some of those attending tea parties are now genuinely concerned about our fiscal future even though they weren’t during the George W. Bush Administration. (Where, I wonder, were the protestors when Bush and a Republican Congress massively expanded Medicare in 2003?) But it’s not enough just to complain; specific proposals need to be developed that go beyond cutting foreign aid and earmarks — just about the only spending that conservatives ever talk about cutting.

In particular, anti-tax activists need to explain how we are going to cut Medicare by tens of trillions of dollars when its beneficiaries already represent the largest voting bloc in America and its ranks will grow sharply as the baby boom generation retires. Because of rising Medicare costs, we would be facing massive budget deficits in the near future even if Barack Obama had not been elected, Republicans still controlled Congress, and there had been no economic crisis.

Still, all movements must start somewhere. If the April 15 tea parties are really about more than just electing Republicans and increasing Fox News ratings, I may join them next year. In the meantime, protestors need to do a better job of figuring out what they are protesting and devise a real plan for dealing with our nation’s fiscal problem. Otherwise, their efforts will amount to nothing more than hot air.